China and Hong Kong stocks on Thursday recovered lost ground since the US-China trade war re-escalated almost two months ago, as a dovish US interest rate outlook boosted sentiment amid optimism on trade relations.
The Shanghai Composite Index closed up 2.4 per cent, to 2,987.12, marking its fourth-straight day of gains. The benchmark was at its highest level since April 30, the trading session right ahead of a sharp decline of 6 per cent as trade tensions flared up.
The advance came after the US Federal Reserve hinted it may cut interest rates ahead if needed. A phone call between Presidents Xi Jinping and Donald Trump on Tuesday night also buoyed investors' mood.
The CSI 300 of large stocks on the Shenzhen and Shanghai markets rose 3 per cent. The Shenzhen Composite Index rose nearly 2 per cent.
Turnover in Shanghai and Shenzhen reached 603 billion yuan (US$88 billion), up from 504 billion on Wednesday and higher than the daily average of 492 billion yuan recorded in May.
In Hong Kong, the Hang Seng Index gained 1.2 per cent to 28,550.43, its highest level since May 8.
"The market is likely to continue rising for a bit because investors are really buying instead of taking quick profits, and the sentiment has improved a lot," said Kenny Wen, wealth management strategist at Hong Kong brokerage Everbright Sun Hung Kai.
Hints of interest rate cuts by the Federal Reserve have taken off some downward pressures on the Chinese yuan and have boosted investors' mood, he said.
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But Wen also said investors should be cautious if the Hang Seng Index rises above 29,000 points, or 3,000 points for the Shanghai Composite Index, because trade talks still involve much uncertainties.
China's inflation rate is also a risk factor, he said. If inflation gets out of hand because of rising pork and vegetable prices, the central bank may be forced to give up monetary easing policies that could boost the market.
In China, financial stocks led the advance, with brokerages and banks shooting up on optimism that regulators are stepping up support for interbank liquidity after the takeover of the troubled lender Baoshang Bank.
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The rising trading volume over the past few sessions also pointed to better business for the brokerages, analysts say.
A gauge of 39 securities brokerages jumped 6 per cent, with four of them soaring by the daily limit of 10 per cent, including Chinalin Securities.
Stocks related to environmental protection also advanced, driven by China's intensifying crackdown on pollution and the recent launch of new waste recycle system in Shanghai.
A gauge of 15 companies in the business of garbage recycling surged 8.4 per cent, with 10 of them jumping by 10 per cent, such as plastic pipe firm Aerosun.
In Hong Kong, insurers rose broadly, as investors expect them to record better investment returns after China stocks soared.
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Ping An Insurance Group rose 3.7 per cent, and China Life Insurance was up 3.3 per cent.
Cosmetics store chain Sa Sa International Holdings increased 9 per cent to HK$2.41, after reporting better-than-expected annual results.
Chinese live streaming app operator Inke jumped by 8.9 per cent to HK$1.72, after announcing it will buy up to 206 million shares, or 10 per cent of its total issued shares, for HK$500 million.
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